The most commonly adopted legal structures in mainland UAE are a limited liability companies (LLC) and a branch office (Branches). In addition, it is also possible to establish a representative office (also known as a liaison office) which is a legal structure identical to that of a Branch, however its activities are limited to serving as an administrative and marketing center for the parent company (Rep Office).
It is also possible to establish an entity in 1 of the free zones in the UAE. Entities registered in a free zone can be wholly foreign owned and no UAE participation is required. The free zone entity can take the form of a free zone limited liability company (FZ-LLC) or a free zone branch office (FZ-Branch).
LLC
Separate and distinct legal entity with limited liability.
On November 23, 2020, the UAE government issued a new decree amending the Commercial Companies Law (New Law) to abolish the fundamental requirement of having 51-percent or UAE national ownership of an onshore company. Therefore, subject to the competent licensing authorities' specific requirements, LLCs may now be a 100-percent owned by foreign shareholders.
A further notice. At the time of writing this guide, information regarding these changes is still limited.
It is mooted that a further Strategic Impact Activities has been issued, which applies at a federal level to all Emirates (Cabinet Decision). The Cabinet Resolution is expected during the 1st quarter.
The strategic list includes the following sectors: security and defense activities and activities of a military nature; banks, money-changing establishments, finance companies and insurance activities; printing cash currency; telecommunications; Hajj and Umrah services; Holy Quran memorization centers; and fishery-related services. Subsequent to the new Cabinet Resolution Decision, it is then at the discretion of the competent licensing authorities of each Emirate to set the conditions for increased foreign ownership for business activities falling outside the negative strategic list. The licensing authorities of each Emirate will therefore determine the permitted foreign ownership threshold of each business activity (not on the negative strategic list) and also set any other applicable requirements, such as minimum share capital or Emiratization thresholds.
Branch
A branch is not regarded as a separate entity but treated as an extension of its parent company. Currently pursuant to the recent changes in the UAE law, a branch no longer requires a UAE national or a company wholly owned by UAE nationals to act as its national agent (colloquially known as a "sponsor" and is not to be confused with a commercial agent), subject to the implementation of the New Law which, amongst other things, has abolished this requirement. The national agent provides licensing and other governmental services for the Branch for a fixed fee to be paid at the date of the licensee issuance but would not have any rights or entitlements to the Entity's business.
At the time of writing this guide, there is little information regarding the abolishment of engaging a national agent pursuant to the New Law, however,more detail on how this will be implemented is expected near the end of the 1st quarter of 2021.
FZ-LLC
Separate and distinct legal entity with limited liability. No restriction on the nationality of shareholders. Activities restricted to the free zone in which the company is incorporated and those the company is licensed to carry out.
FZ-Branch
A branch is not regarded as a separate entity but treated as an extension of its parent company. No requirement to appoint a national agent as in the case of a Branch.
Dual License Branch
A Dual Licence Branch is a branch of an FZ-LLC established in mainland UAE. It is not treated as a separate entity but treated as an extension of its parent company. Establishing a dual licensee branch is possible in the case of FZ-LLCs registered in certain free zones only. It may operate from the same office as its parent company without the need for a separate registered address.